Saturday, September 27, 2008

Barriers to E-Learning

Today companies are spending enormous sums of money to train & retrain their employees. Employees have an extensive range of training programs delivered in multiple ways. The competitive pressures and market forces are driving companies to keep their cost of training low. Note that training costs should also include the loss of productivity during the training period

The need for having a wide range of training programs and the pressures to manage costs and also increase employee satisfaction has led to rapid growth in E-learning.

E-Learning emerged a decade ago – in late 1990’s and has grown significantly since then. However the success of E-learning has been mostly limited to USA. In rest of the world E-learning is yet to succeed.

The barriers to success of e-learning in other countries are as follows:

  • Language barriers: Most of E-learning content was developed for US audience, hence the language & accent is in American English. E-learning content has to be localized to account for local languages.
  • Mindset barriers: For many people, learning has to be face-to-face – i.e., person to person contact is essential. E-learning is seen as too synthetic and impersonal. The general perception is that e-learning is not true learning.

However, employees do not find any technical barriers to e-learning in the organizational level. This is mainly because employees today broadly have the same level of computer skills.

Friday, September 05, 2008

Requirements Gathering For New Product Development

Developing a new product is a daunting task. If the product happens to be new to the market or new to the world, then developing a new product is even more challenging. There are no fool proof methods. Having worked in Silicon Valley with startups & highly successful companies, I can give a few pointers towards successful new product development.
The first step in successful product development is requirements gathering. Requirements’ gathering is a complex task with various sub tasks and levels – which is usually accomplished through several iterations.
New products typically have their roots in an idea. The idea is then developed into a product concept (see: Innovation Management - Taking Ideas to Concept). Once a product concept is developed, the next stage is: Define the product requirements.

What is a New Product?
First let us define what is a new product? A new product in context to this article means “new to the world” type products – i.e., such a product is being introduced for the first time: First time for the company or first time to the market. Examples of such new products include:
  • Google Chrome:- A new type of browser – and the first one for Google.
  • SMART Car
  • World Mate Mobile software
  • iTunes:- iTunes was first of its kind in music store/distribution system.
  • Motorola’s Iridium
  • 3M’s Post It
  • Blackberry Pager
  • Cast Iron Integrated Appliances
New product Requirement Gathering

Requirements for a new-to-the-world product will always be vague. Therefore the best strategy is to capture the requirements – however vague they are in a document. New product requirement gathering starts with identifying needs of various stakeholders:

  • Customers & Users
  • Promoters
  • Developers

1. Customer & Users

The need for a new product comes mainly due to the shortcomings in the existing products. As a result, current products in the market are unable to meet the customer needs. So the first step is to identify the customer needs. For a new-to-the-world product, we need to capture the perceived customer needs.

1.1 Perceived Customer needs

Identifying customer needs for a new product is often tough - In most cases, many customers are able to express their frustrations with the current products in the market & identify the shortcomings in the current products, but customers cannot express their needs for a new product. Therefore one must be prudent enough to derive the customer needs.

There is a well established method to capture the perceived needs of the customer – called as Product Opportunity Gap (POG) analysis. POG analysis can be used very effectively to discover the latent needs, the current shortcomings in the existing products and future needs of the customer. For more information on POG see: Product Management - Developing breakthrough products

For example, let us take an example of developing a personal video/MP3 player. The customer needs for a personal video player are:

1. Large screen size – but small enough to carry around in a pocket.
2. Battery life to last at least for 10-12 hours.
3. Removable battery for replacement
4. External battery charger & internal battery charger – i.e., user should be able to charge the battery while the battery is inside the device.
5. Universal power adaptor – should work on both 110V & 220 V systems.
6. Easy/intuitive user interface.
7. Ergonomic design for comfortable handling. Anti-Slip hand holding areas.
8. Splash proof & water resistance
9. Connect to PC via USB & WiFi, connect to TV via HDMI or S-video
10. USB host interface so that user can connect other data storage devices.
11. Ability to read data from other data storage devices ( Pen drives, portable hard drives, video cameras, etc.)
12. Connect to headsets via Bluetooth.
13. FM player, MPEG3, & MPEG4 decoder i.e., multi format audio/video decoder
14. Digital Video Recorder – ability to record TV programs.
15. Rugged construction so that the product does not get damaged when accidentally dropped.
16. Stylish design with interchangeable colored cases & Hip carrying case

These are some of the basic requirements for any type of personal video players. Data storage technologies can then become additional requirements can be used to create different types of products:

1. DVD player or Blue-Ray player
2. 100-300GB Hard drive to store movies, music & photos
3. 32GB or 64 GB, extendable up to 256 GB Flash memory via memory cards.

1.2 Intended Operating Environment

A product will operate in some operating environment. Often times, this operating environment is pre-existing and can be well defined. The intended operating environment must be well documented in the product requirement document – so that the developers should well understand and if required the operating environment can be reproduced in the development labs.

Understanding the user environment is crucial for the success of the new product. All persons involved in developing the new product should be able understand the user operating cases and use cases. This helps in developing products that meet the user requirements.

Operating environment factors include: Places (home, office, traveling etc); User conditions such as: Dusty environment, Hot weather, cold weather, high humidity etc; User knowledge or cultural bias etc.For example take the case of the personal video player. The operating conditions include:

  1. Usage at home (bedrooms mostly), office & mostly while traveling – in cars, trains & flight
  2. Should operate in extreme weather conditions from 40oC to -5 oC, should be able to operate in dusty, humid environment
  3. Users may not be computer savvy
  4. Users may not be very comfortable with English language
  5. Power supply conditions may vary greatly – ability to work with dirty power.
  6. Users are usually teenagers.

1.3 Customer Use cases

How does a customer use the product? What are the different uses for the product?

It is very important to document all the possible customer use cases, so that developers can understand how the product is being used. When a new product is being developed, it may not be possible to capture all the possible use cases – extra effort must be taken to document as many use cases as possible.

Users often times use the product in ways that was not originally intended by the manufacturer. But such use cases cannot be documented before the product is developed. This implies that use cases must be documented continuously even after the product has been released in the market.

2. Promoter’s requirement

When a new product is being developed, promoters play a major role in driving the product requirements. Promoters – aka investors or managers are the real brains behind the new product. Promoters provide the direction, vision and the business rationale for the new product. The common requirements which are typically driven by promoters are:

  1. Technology Platform
  2. Business models
  3. Business use cases

2.1 Technology Platform

Promoters often decide on the technology platform – often times without consultation with the potential customers. This is often done on gut instincts. Many a times promoters have deep understanding of the market and that gives them the requisite knowledge to choose appropriate technology platform for the product.

What is technology platform?

The meaning of Technology platform varies widely with the industry – but it all refers to the foundation technology on which the product will be built on. For example: In case of software, it could imply the operating system (Windows, Unix, Linux etc.); In case of automobiles it could imply the engine technology (Diesel or gasoline or Natural Gas or electric or hybrid); In case of cell phones it could mean the operating standard (GSM or CDMA or 3G) etc.

Promoters are the best persons to decide on the broad framework of underlying technologies that will be used to develop the product.

2.2 Business Models

Every product or a service in the market has a business model in which the business sells the product/service. It is the promoter’s job to define the business model for the new product. The business model decisions include: manufacturing location/partners, distribution systems, pricing, margins, licensing etc.

Business models play an important role in defining the final product. The business model for a new product has to be determined before the product development starts – and refined over time. As the business models change, the product features/specifications also change. During this process, it is the role of the product manager to closely orchestrate the business model needs to the developers and the vice-versa.

Business models must then be translated into product requirements and these requirements should be orchestrated to the developers. Developers in turn can provide feed back to the promoters and help them fine tune the business models.

To understand this, take the case of iPod & iTunes. Apple built a business model around personal audio/video players, where users can manage music/video in their iPods by using iTunes store to download music via a local copy of iTunes on the computer. This complete business model was the key factor that ensured the success of iPod, while other MP3 players failed to build a sustaining business mode to support the product.

2.3 Business Use cases

Business use case is an extension of business models. In case of commercial/industrial products, the product will have a buyer, which is the firm, who is different from the user. The Business use cases include factors such as operating costs, total cost of economy, ease of maintenance, serviceability, customer support, release management etc

For example, Microsoft bundles its Office suite in many different ways – based on licensing. A basic license will consist only of Excel, Word, PowerPoint, & Outlook. While enterprise license will have lot more: Visio, MS FrontPage, MS project, MS Notes etc. This differential product bundling is an example of business use case. Similarly, GM & Ford offer their cars with different pricing and services bundle for car rental companies.

3. Developers Product

Developers are the engineers & technicians who actually develop the product. Developers can give valuable inputs to product requirements – mainly in terms of what is technically feasible and with inputs on how to make a particular feature better. The role of developers in requirement gathering can be broadly classified as:

  1. Project constraints
  2. Product improvements

3.1 Project Constraints

Every product development project has its set of constraints. These constraints in turn limit what is feasible – which in turn defines the final product. Developer’s inputs are very valuable in developing new products – mainly because new product ideas are often very lofty, which is very high in promise but not based on reality. The developers can then give the project a healthy dose of reality.

Promoters and customers often start out with a very high ambition and often demand a product so advanced that the current engineering technology would be able to deliver it. Therefore the product requirement must be toned down to match with the reality of today’s technologies.
The typical constraints that bound any product development projects are:

  1. Resource constraints
  2. Technology constraints
  3. Time-cost-quality constraints

The project constraints limit what is feasible with the given set of resources. On one hand constraints act as a limiting function, but on the other hand constraints also act as impetuous for innovation. Developers are smart to figure out ways to go around the constraints and innovate. Product managers must encourage such innovative thinking to prompt developers to innovate while giving the constraints.

3.2 Product Improvements

Product Developers are typically engineers & technicians who have several years of experience in developing similar products. With experience, they would have learnt ways and means to improve on any product. So given a set of product requirements, they will certainly have ideas to improve the product in ways that was never thought before. These improvements will be small incremental ideas – which makes the product better or cheaper to manufacture or easier to use. It is therefore mandatory for the product manager to gather these ideas from the developers. (Also see: Ideas to Concept – Small Ideas are better)

Product improvement ideas/suggestions will be coming all through the development phase. It may be tempting to have all these ideas to be incorporated into the product design; however such a move will have an adverse impact on the project schedule. The best solution is to capture these product improvement ideas in the product requirement document before the start of the project, and ideas generated during product development must be viewed on its merit and project impact to decide if that idea can be incorporated into the current development version, or should it be deferred to the next version. To accomplish this, product management must start with a plan for the follow-on product to the first version – even when the first generation product is in development.

4. Form a feedback loop

New-to-the-world products do not always meet the customer requirements in the first release. The new product may meet some of the customer needs – but the solution will often have its fair share of short comings. It is therefore very prudent to plan for multiple revision of the product. A general rule of thumb is that a new product will take at least three versions before it becomes stable and widely accepted in the market. New Product development projects will have negative NPV during the initial few releases of the product and this must be factored into the product development financial planning.

So the best way to improve the product is to release the product into the market – for the target set of customers, take their feed back and then develop the next generation/version of the product. During this cycle, experience from the customers, promoters and developers must be captured as feed back to the product and convert it into product requirements and then incorporated into the next version of the product.

Once customers start using the product, it is very essential that customer experiences are observed and documented by promoters, developers & product management. Documenting the customer experience is a form of customer feedback – but it defers in the basic fact that the customer does not give the inputs, instead the customer is observed while he/she is using the product and that observations is documented. This practice is called Customer Anthropology.

Customer feedback, customer studies, promoter feedback, and developer feedback should all be channeled into a new product requirement document. This closed loop orchestration must be repeated several times to achieve mass customer acceptance.

Closing Thoughts

Developing new product requirements can be summarized in the following state diagram.

Product requirements initially start out as a vague set of ideas which needs to be filtered down in to a set of instructions that can be implemented by developers/technicians – to realize a product. New product development is an iterative process – where at the end of each iteration, a working product is produced. The product released at end of each iteration will not be perfect and will need further refinement & improvements which has to be done in the subsequent development cycles.

Promoters and developers must be aware that new product development will take at least three iterations to get to the targeted set of customers. Product managers and project managers must plan accordingly for multiple iterations – and see to it that the product is enhanced progressively through the iterations.

Tuesday, September 02, 2008

Internet Bandwidth Cap will limit Innovation

Today in New York Times there is an article “Comcast to Place a Cap on Internet Downloads”. This is first sign of trouble in Internet economy. The idea of putting cap on Internet download is akin to putting up speed barriers in the information freeway - A move which will surely kill innovation.

Internet has been one of the prime drivers of Innovation in the last decade. Internet changed how people communicate, how people access information, how people buy things and most importantly how people live their lives.

I live in India, where Internet is relatively expensive and usually comes with a bandwidth cap. As a result, I know how stifling it can get if Telco’s are allowed to impose such caps and restrict Internet usage.

To understand the impact of download cap, one must come to India. In India, YouTube is a non-starter, IPTV is still in its infancy, Police impose strict monitoring rules on cybercafé, i.e.: Internet usage is limited.

With all these restrictions, it is not surprising to see that there is not even one Indian company that became successful in the Internet space. Here is pop quiz: Name top-10 Internet companies from India?

Do you find that tough? Then try the Top-5. To sum up the popularity of the top-5 Indian Internet companies is less than that of a small Internet startup like or E-Commerce is virtually non-existent in India. Even the biggest Indian retailers do not have E-commerce presence.

Closing Thoughts

Open and unlimited Internet is the key for innovation. Restricting Internet usage will kill innovation and competitiveness of US firms. In the long run, it will affect the overall development of various technologies: Internet, Software, Hardware, semiconductors, entertainment, and telecommunications.

Saturday, August 23, 2008

Are You In Shape to Innovate

“Luck Favors a Prepared Mind”
Innovation is like athletics. The ability to innovate is similar to that of an athlete’s preparedness that requires constant training & preparation. Similarly, Innovation requires one to be curious, have a sense of purpose, willingness to explore and be ready to accept failures gracefully.
Successful innovation is like an Olympic athlete, it is usually a result of huge efforts: both in execution & preparedness.
Many small & medium sized firms often spurn innovation during good times; the companies tend to concentrate on execution and profit maximization and look at innovation only when competition introduces new products. Such sporadic rush towards innovation is risky and often disastrous. Instead, companies should constantly prepare for innovation.

How to prepare for Innovation?

Creative people always have the following traits:
1. Curiosity
2. Sense of Purpose
3. Willingness to explore
4. Ability to withstand failures

Most people have these characteristics in their childhood – but are suppressed during adulthood.
Firms can use these traits in a productive and non-risky way by having idea generation sessions at regular intervals. These idea generation sessions should be structured such that participants should concentrate on current problems and generate ideas around it. The benefits of such sessions are immense: Operational efficiency increases, people are encouraged to think, and develop new ideas, enhances curiosity among participants and builds a sense of purpose. Most of the ideas generated during these ideation sessions are usually simple ideas, and few will be truly path breaking ideas. (See: Ideas to Concept – Small Ideas are better )

Companies can afford the risks involved with small ideas – and over a period of time, the organization gains proficiency in taking an idea into business opportunities. Over a period of time the company gains enough expertise to take on bigger ideas – and creating path breaking products.

The ideation generation sessions must be followed by idea scrub to identify low hanging fruits (see: Innovation Management - Taking Ideas to Concept ) and then create teams to work on those ideas. The first task for the team is to develop a basic design/architecture for implementing the idea. The next step for the team is to develop a business plan for that idea and see the viability of the idea.

Once the team goes through the business plan phase, it will be clear to them on which ideas are work implementing and which have to be rejected. The teams that work on rejected ideas will know the reason – and prepare them to face failures. Care should be taken not to demoralize the teams – instead the members should be encouraged to come up with better ideas.
Train yourself regularly for Innovation & you will win.

As the saying goes, luck favors the prepared mind; success in innovation goes to those who train for it. Companies that have developed the skills for innovation are the ones that will be successful at it. Preparing for Innovation implies equipping the employees with necessary skills and giving them enough opportunities to practice those skills.

Friday, August 22, 2008

E-Learning has huge potential in India

India celebrated its 61st Independence Day on August 15, 2008. Even after 61 years, a large section of the population does not have access to proper education. Barring the top schools under ICSE/CBSE system, the IIT/IIM/NIT/IIIT and few other elite universities, the education standards in rest of schools & colleges are poor. The need of the hour is to build a cost effective education system – which can deliver the best quality education system like that of the elite schools but at one tenth the price.

When I look at the challenge, I can see the answer in e-Learning. But then e-learning is not the right answer. E-Learning has been around for quite some time now, and is yet to make the mark. So what is that we are missing? This question got me thinking, exploring and brainstorming.

E-Learning in India

E-learning in India is miniscule when compared to traditional learning. E-Learning is limited to select few elite universities/colleges and top-100 Indian companies. (Plus fortune-500 firms that operate in India.) The amount of money invested on E-learning by top-100 firms is negligible when compared to the instructor led trainings. In the academic world, E-learning is almost non-existent.

This dismal picture hides the real potential of E-Learning and also reveals the reasons for the failure of E-Learning.

Challenges to E-Learning

E-Learning has not taken off in India for several reasons that range from faulty technology to government regulations.

The failure of E-Learning can be greatly attributed to wrong technology. The current PC & Web based technology is not suited for Indian conditions. The current technologies used in E-Learning were all developed in America – and is not suitable for India & other developing countries.

The technical barriers to E-learning in India are as follows:
  1. Low Computer Penetration
    India has very low computer penetration. Currently only 2% of Indian population has computers at home. This means that e-learning via PC will be a non-starter.See:

  2. E-learning is based on computer platform with broadband Internet

    Coupled with low computer penetration, the high price of Internet broadband & non availability of broadband in many parts of the country implies that very few people can access E-Learning content that is being created.

  3. Technology Barriers.

    Today’s LMS platforms used in E-learning are quite complex. The users are expected to have basic computer skills to operate. Given the fact that the entire audience for e-Learning is there for basic education – the current e-Learning platform is totally failure for the intended audience.

  4. Language barrier.

    Probably the biggest drawback of today’s e-Learning technology is the language – All the current e-Learning platforms & content are based on English language. Though India has a huge English speaking population – the target audience for basic education via e-learning are not proficient with English and with computers.

Technical barriers are not the only thing that is pulling back e-Learning. Apart from the technical barriers, there are business use case problems to deal with.

  1. Faulty Business models.

    The current technology requires deployment of Learning Management Systems (LMS) running on a central server. The users have to log in via Internet or Intranet to access the programs. Reliable LMS software are expensive to license – it is about $25 to $100 per user per year (depending on the number of users), in addition there is need for several other software: database, web server, security systems etc. Plus there is the cost of licensing the learning content. The total cost of the systems & software itself has to be amortized over the number of users. This business model will work in a corporate environment where companies have proprietary content and are willing to foot the bill for e-learning system.

    The current e-learning business models are best suited for corporate firms – where the users are not cost sensitive & users have sufficient computer skills. This model however is not suitable for a large scale deployment that will be required in an Indian scenario.

    E-Learning has been successfully deployed in some of the universities abroad – mainly in the US & Europe, but here the cost was not a major factor.

  2. Outdated government rules & regulation

    Education system in India is governed by various governmental agencies. These agencies follow archaic rules that are designed to extend government control and prevent any form of innovation. The current rules do not exactly prevent e-learning, but the system does not encourage e-learning either.
  3. Cultural mores and norms
    Culture in India also hinders e-learning. The society considers classroom learning as “REAL” learning and any other form of “distance” learning is essentially second rate. As a result, people are naturally discouraged from opting for e-learning. On the contrary, Indian Universities have developed and promoted distance education – mainly through correspondence courses. These courses are offered only for higher education – as a substitute for college/university education.
Closing Thoughts

E-Learning has a big potential in India given the huge population base and the rapid growth of the economy. However there are quite a few obstacles to be overcome. This article describes the problems which prevent e-learning from taking off. In the subsequent articles, I will talk about the possible solutions and the changes needed to make quality education accessible & affordable for all.

Tuesday, August 19, 2008

Customer Co-Creation and Innovation Management

In June 2008 I wrote about co-creation as an innovation strategy - New Age Innovation Strategy: Co-Creation with Customers. The challenge in capitalizing on the co-creation strategy has been to identify what is the value being created and how the company can leverage that. Over a period of time, I have noticed that many companies routinely co-create with their customers, but they have failed to make full advantage of it. This became evident while dealing with Ashok Leyland – India’s second largest manufacturer of commercial vehicles. Customers of Ashok Leyland’s trucks and buses have developed several variants and different customizations on these vehicles, but Ashok Leyland had not taken full advantage of it. This apparent failure to capitalize on such wonderful innovation opportunities led me to develop a framework for capitalizing on co-creation with customers.

Co-Creation and Customer Relationship Management
Customer centric innovation is not possible without having a robust customer relationship management strategy. Companies must first have a robust customer relationship management policy and strategy to identify the levels of customer relationships. In my earlier article on Customer Relationship Management & Sales, I had listed out how companies can classify customers based on the levels of customer relationships & customer needs. Relationships with customers can be classified into six levels:

Level-1: Utility Need
Level-2: Convenience Need
Level-3: Comfort Need
Level-4: Personal Recognition Need
Level-5: Self-expression Need
Level-6: Co-Creation Need

When a company has customers at the highest level of customer relationship – where the company is actively co-creating value or innovation with the customer, then the company should know what types of co-creation should be leveraged for greater benefit what types of co-creation should be kept out.In this article, I will concentrate on identifying types of co-creation. This will help managers identify co-creation opportunities that can be leveraged into real innovation.
Types of Co-Creation

Co-Creation exists in two forms:

  • Explicit Co-Creation

  • Implicit Co-Creation

Explicit Co-Creation occurs when customer openly seeks manufacturer’s help to modify existing product or create something new. This can range from something as trivial as changing the color of the product to very complex engineering – such as building a nuclear power plant.

Implicit Co-Creation occurs when the customer buys the product and modifies it to suit his needs. The customer may or may not disclose such modifications with the manufacturer.
Also at times customers are forced not to disclose modification. It is because managers tend to think that customers should use the product as it was intended by the manufacturer, but customers may have unique needs thus forcing them to use the product beyond the normal use cases – and that would violate the user terms.

In this article, I will concentrate only on explicit co-creation.

Types of Explicit Co-creation

Explicit Co-creation can further be classified into eight types based on the level of involvement of the manufacture & the customer.

Type-1: Mass customization
Type-2: Product Finishing
Type-3: Product Adaptation
Type-4: Customized experience
Type-5: Real time customization
Type-6: Open Community Product design & development
Type-7: New Service Design
Type-8: New product design & development

Type-1: Mass Customization

Co-Creation can exist in various forms. Starting with mass customization where every product is customized for each customer & the products are sold in huge numbers. Mass customization usually will not have a delivery impact, though there may be a price impact. Also the range of customization possibilities is limited by the manufacturer.

For example: Dell Inc., can customize every single computer it sells. Dell’s manufacturing and customer friendly web portal encourage customers to customize their computers. Today, mass garment retailers such as Levi’s can customize every single pair of jeans sold to each customer. See: Web Retailing Gets Really Personal

In mass customization, the customer involvement is not much apart from giving a set of simple details. The manufacturer has streamlined the manufacturing process to such an extent that it requires no managerial involvement to deliver the customized product. There is absolutely no engineering/pricing analysis needed to deliver the customized product. The customization is a “push-button” process.

Type-2: Product Finishing

In this type of co-creation, the customer is involved only in the product finishing details. The customer does not have much say in other details – such as engineering, materials manufacturing process etc. The level of details that the customer can specify is limited to the product finishing – but it has price & delivery impact.

Many manufacturers allow customers to specify the final finishing details. The customer is free to choose from wide range of possibility and based on the customer specification, the delivery time and the final price is worked out. For example customers can specify the color, trim and accessories in the car – but the customer has a wide range to choose from. For example Morgan Cars allows its customers to choose the colors, trim and all accessories – the range of choice available to the customer is huge – and it takes time/effort & money to deliver the customized product. Another good example will be Stretch Limousine builders. Each limousine is custom made and customer gives the specifications all the finishing details.

Type-3: Product Adaptation

Product Adaptation refers to cases where the manufacturer is actively involved in adapting the final product to meet the customer requirements. The manufacturer or a third party service provider will ensure that the product will perform the tasks stated by the customer. Customer takes the responsibility of providing detailed requirements of the end functionality and is also deeply involved in the adaptation. The product adaptation requires complex engineering and has significant cost & time implications.

Typical example of this will be ERP implementation. SAP provides the basic software, but each customer can adapt the software to meet their specific needs. SAP adaptation involves several engineers working for several months – all this has a major impact on time taken and the total cost of using the product. Similarly, there are several software that needs extensive user adaptation: Oracle’s Peoplesoft, HP OpenView, IBM Tivoli, EMC2 Documentem etc.

In the industrial world, all heavy engineering equipment such as TERRATAC’s tunnel boring machine, Ransomes & Rapier’s dragline excavator, Westinghouse’s nuclear reactors, BHEL Generators etc. All heavy engineering equipments are often manufactured as per customer’s specifications and the company takes the responsibility for its installation to its initial operation.

Type-4: Customized experience

Here the firm and the customer work together to create a customized experience for the customer. This is often seen in service industry and in retail sector.

For example, consulting companies such as McKinsey, BCG or KPMG etc., work with the customer to provide a unique solution. The customer’s involvement will be very high and on par with that of the firm. Even in retail sector – high end boutiques such as Luis Vuitton, Valentino, etc., provide a unique shopping experience to each individual customer.

GE’s Aviation business is one of the best examples of creating customized experience for customers – thus co-creating value with customers. GE commercial aviation services leases planes, jet engines and other aviation equipment to customers. GE treats each individual customer separately and structures the lease agreements that best fits the needs of the customer – thus creating a unique customer experience.

In the recent times, manufacturers are building various service extensions to their products – with the aim to provide better customer experience. Pharmaceutical firms and Genetic engineering firms are working on developing medication which is unique for each customer, and then deliver it though health care providers to create a unique customer experience.

Type-5: Real time customization

With the modern ERP & IT systems it is possible for manufacturers/service providers to have flexible operations. This enables the firm to offer real time customization: Customers can log into the systems and change the order specifications. For example, Amazon allows customers to change the order or the order delivery dates/schedule even after the order has been processed. FedEx allows its customers to change the delivery time for major customers. Weyerhaeuser allows its regular customers to change the order at a short notice period.

Type-6: Open Community product design & development

Linux is the poster child for open community development. Following the success of Linux, companies are now adapting different techniques for open community based product development. SUN opened up its Solaris OS software; its OpenOffice suite and a whole range of applications are now made open for general public to use, modify and develop. The company benefit by consolidating all the community development and thus improving the product.

A different variation of this approach is to create a user group. The user group may be sponsored by the firm or sponsored by the individual users. Today, few companies have successfully exploited this as a venue to interact with customers, take feedback from customers to improve & develop the product. For example, SNUG – Synopsys User Group, Harley Owners Group, Land Rover Clubs, Cadence Designer Network.

Type-7: New Service Design

Oftentimes customers often need different service than the ones being provided. In such cases many customers approach the seller with such service ideas. If the company may choose to implement these new services – then the customer is willing to help design the service offering. This kind of new service development is often seen in the financial world where investment banks develop new service lines based on customer involvement in service design.

IT services companies or pure play service companies routinely scout their customers for inputs while developing new service lines. For example FedEx developed a system by which customers can log in and change the delivery times and the transit schedules on the fly – when the delivery is being processed. Similarly, Amazon offers its customers to modify their orders and delivery schedules thought its IT systems.

Manufacturing companies too are jumping into this bandwagon. Caterpillar Inc., launched a new service line to help the customers lower maintenance costs and also be more environment friendly by remanufacturing old & worn out parts. See: Caterpillar Remanufacturing Services .

GE home appliance division has implemented an advanced ERP system which allows retailers to access GE’s warehouse and view it as though it is their inventory. The retailers can book orders against the inventory in GE’s warehouse – and GE will deliver it to the end customer. By tightly integrating the ERP system between the retailer and GE, GE is able to create a new service for its partners – who in turn can offer better range and prices to the end customer.

Peter Drucker once said “Customer does not want a 1” drill bit, he wants a 1” hole”. This statement makes us realize that customers are buying a product to satisfy their specific needs and that need can be fulfilled by a service. This theory is now being applied in the Software as a Service model – where customers are opting to buy the service instead of buying the software. Google Apps, Google Docs are good example of a service design built around the products.

Type-8: New product Design & development

In rare occasions, customers engage the supplier in developing new products. This is more common in business-to-business environment – where one business firm wants to develop a new product and that in turn forces all its suppliers to develop new products. For example to develop Tata Nano, Tata Motors has to involve several of its suppliers to innovate and create new products. Rane systems developed new steering wheel systems to meet the price & performance requirements of Nano. Bosch group had to develop an entirely new fuel injection system. Similarly, when Apple wanted to develop Apple Air – the ultra thin laptop, Apple approached Intel to develop a new range of microprocessors.
Co-creation is not without potential problems. The problems are more acute in case of new product design & development. Customers engage with vendors to develop new products mainly to serve their own needs. Therefore there will be a strong pull/resistance to ideas from the vendor if vendor tries to develop a generic product out of the joint efforts. Large customers can put exclusivity clauses over the usage of the new product – especially if the customer has enormous power. For example, Apple Inc, used Infineon 3G chip – but forced the vendor to mask it – void of any marks, and even forbade the vendor from reveling it even to investors & share holders.

The biggest hurdle in developing new products with the customer is the question of who owns the Intellectual Property Rights (IPR). Since the customer is also investing engineering/scientific resources and coming up with ideas, the customer will insist on having a joint IPR over the new products. If IPR is jointly owned, then the customer can demand & get exclusive use of the new product. The best way to get around this potential problem is the have IPR licensing agreements in place before starting on new product development.

Co-Creating new products or new service lines for a particular customer is risky. The vendor must be willing to take the risk. Customers are often willing to risk on the success of the program, but not bear the financial risks involved. Therefore, developing a new product or a service will require a higher level of financial scrutiny and managerial decision making. Senior management should get involved in managing the co-creation of new product development or new service development.

Levels of Customer relationships & Co-Creation
Co-Creation is all about customizing the offerings to meet customer needs. The extent to which a company is willing to customize/modify a product or a service is based on the quality of relationship it enjoys with the customer: Higher the level of relationship, greater the levels of co-creation. This implies that co-creation at the highest level – i.e. new product development or new service development is reserved only for select few customers.

The table below maps the types of co-creation with the levels of customer relationships. This mapping is not absolute – it is only indicative. The mapping between types of Co-creation and levels of customer relationships varies with industry and economic outlook.

Closing thoughts

Today Co-Creation is fast becoming the best strategy for innovation. This makes it necessary to understand the various types of co-creation and levels of customer engagement – so that one can make better decisions. In this article, I have outlined eight types of co-creation and mapped it to levels of customer relationships.

Managers today are busy delivering to customers and in the process there is a good possibility of missing out on good co-creation opportunities or losing the knowledge gained during the customer engagement. By mapping the customer relationships and classifying the nature of work being done, managers can ensure that the firm does not lose out on co-creation opportunities and also capitalize on co-creation activity.

Friday, August 15, 2008

Ideas to Concept – Small Ideas are better

Every time we conduct an idea generation workshop or a simple brainstorming workshop, people often like to come up with big dramatic ideas. For example, when I conducted a brainstorming session for a leading auto maker, people came up with big ideas – a new range of automobiles, Maglev trucks, a drastically different engine technology etc.

People like big breakthrough ideas. In fact, the bigger and sexier the ideas, the more people are drawn to them. During the idea generation sessions, even managers think about big ideas – its like everyone wants to hit a home run – a dramatic breakthrough that will alter the face of the industry.

In reality such big ideas rarely gets to the implementation stage. Most of the big dramatic ideas die quickly – and will not get past the first gate. The reality of innovation stories is that most innovations are all small ideas. There are few BIG ones – but they are as rare as a 10 carat color-A diamonds. (Which only governments can afford)

As innovation consultant, my advice is to go after small ideas. Small ideas are where the real action is.
Why do I recommend small ideas?
There are several reasons, but I will stick with just two:
1. Small ideas help build sustainable competitive advantage
2. Small ideas build performance excellence.

In the global economy, managers are hard pressed to give higher returns to investors. This implies that ideas with lower risks and maximum gains are the ones that should be implemented.

Sustaining a competitive advantage

Internet economy means that ideas implemented today will be copied by the competitor tomorrow. This means that BIG ideas of today will attract competition in droves and quickly erode the competitive advantage.
For example, Tata Motors designed & built TATA ACE – a breakthrough in mini-trucks for developing economies. But within one year of its introduction, three competitors have developed similar products: APE-Piaggio, Force Motors, and Mahindra & Mahindra. If Tata Motors were to rely solely on design innovation as a competitive advantage factor, that edge will be gone in a flash. (Imitation is also a form of Innovation, but the imitator has an advantage of avoiding costly mistakes)

Take the case of Motorola’s Irridium project: Motorola’s grand idea of anywhere communication system based on 66 satellites was supposed to provide instant wireless communication all over the world. It was one of the GRAND ideas. But implementing such a grand idea had so many challenges and in the end Motorola made so many design compromises - which made the final product unusable for most of the potential users. The handset was too big & bulky; the handset needed to have a line-of-sight communication with the orbiting satellite – which meant that these handsets cannot be used indoors, and lastly the cost of making a call was so prohibitive that it appealed to a select few.

The competition – in form of various telecom operators nibbled away the advantage of Iridium with lots of small ideas: digital cell phone communications, use of Dense wave multiplexing in Fiber Optics, CDMA, GSM etc – and in the end the operators could provide the same level of service as Iridium originally intended – at a fraction of the cost of Iridium.

In my study of sustaining competitive advantage shows that companies that implement a steady stream of small innovations enjoy significant competitive advantage over their competitors.
Take the case of Nokia for example, Nokia introduces at least 24-28 new handsets every year and with each handset Nokia introduces small innovations – which are usually based on the earlier innovations. All this together has helped Nokia build a significant competitive advantage over other handset makers.

If you are still not convinced about the futility of BIG ideas, see how many handset makers have competitive products to Apple’s iPhone.

My observation & my advice – BIG ideas sounds sexy, but implementing BIG ideas involves BIG headaches. Also success of a BIG idea will attract attention from competition and will soon flood the market with “me-too” products. Small ideas, on the other hand, are less likely to attract a direct competitive response. Also competition cannot really copy these small ideas as they are usually built on other small ideas. For example, Nokia introduced a series of business phones: E50, E51, E60, E61, E65, E70, E90, E91 etc. But the competitive response from Sony Erricsson or Samsung or Motorola has been negligible. Sony Erricsson has only one comparable model P1. Motorola has one: Motorola Q Even Blackberry has failed to meet Nokia headlong when Nokia is competing for Blackberry’s enterprise customers. Instead all the cell phone makers are working towards meeting the competitive threat of Apple’s iPhone.

My observation is that small ideas are less likely to attract attention from competitors, and often competitors will fail to respond to such small innovations till it becomes too late.

My advice is:
A large number of small innovative ideas implemented in measured steps through a detailed product development plan is the surest way to build a long sustaining competitive advantage.

Build Performance Advantage

In a recent innovation idea generation session, I used Lotus Blossom tool to help participants generate ideas. For this session, I had specifically asked the participants to generate ideas on “how to improve the product’s performance”. In the session 80+ ideas were generated and ~45 ideas were taken up for implementation immediately. The ideas taken for implementation were simple ideas that could be implemented immediately with little investment. The ideas generated in this session were specific to the company’s product and could not be copied by any competitor.
Employees always have ideas to improve the product or improve performance. By implementing large number of small ideas – one can drastically improve the performance or reduce the costs or both. Such ideas help in improving the market share and improve the bottom line.

A good example of this strategy is Bajaj Auto. Bajaj auto has implemented several ideas to improve the performance of its motorcycles – both in terms of fuel efficiency, handling performance and manufacturing costs. As a result, Bajaj Auto now enjoys a higher margin than its arch rival Honda motors.Another good example is Toyota. When Toyota entered US markets in 1970’s, American car manufacturers laughed it away. But Toyota persisted with small improvements in quality, fuel efficiency and reliability. By 2008, Toyota has become world’s largest car manufacturer. Today Toyota Prius has a fuel efficiency of 43 miles/gallon, while GM, Ford or Chrysler does not have one product that matches Toyota Prius in fuel efficiency.

Build Operational Advantage

Small ideas are often tough to imitate and almost impossible to copy – if the ideas are related to operations. Every company has its own unique operations, and operational improvements will result in increased efficiency which others cannot copy or imitate.

For example, Toyota’s new flexible manufacturing system allows it to build multiple types of vehicles with the same factory. This flexibility allows Toyota to rapidly change the product mix to suit the market conditions and increase profitability. Given Today’s high Oil prices, the demand in the US for Prius has gone up significantly while the demand for SUV’s & pickup trucks has fallen. To adapt, Toyota’s flexible manufacturing systems allows it to make more Prius cars instead of SUVs – thus gain market share even in a recessionary market. See: Autoblog
Also see: Toyota Adopts New Flexible Assembly System

Mahindra & Mahindra – an Indian auto major & world’s third largest maker of tractors has built an excellent reputation around operational advantage. Mahindra & Mahindra encourages innovations at the shop floor – which translates to incremental product development and improving manufacturing operations. For example, developing a chassis made of tubular steel rather than the traditional pressed steel for its SUV saved $17million/year in manufacturing costs for Mahindra & Mahindra. (See Harvard Business Review July-August 2008)

Small ideas – small innovations which lead to better operations are always tough to copy and thus it secures a strong competitive advantage in the long run. Japanese call it “kaizen” and have demonstrated to the world what such small improvements can do.

Closing Thoughts

Every company wants to out-innovate its competition. In this race, it is easy to get tempted to go after big innovations and managers tend to ignore small innovative ideas. But the business reality is different. Each small idea may not rake in big profits, but they build strong competitive advantages. When lots of small ideas are implemented, one can really build BIG competitive advantage and also BIG profits. Toyota, Nokia, Mahindra & Mahindra have shown how small ideas help. In my opinion, small ideas are like infantry while big ideas are like fighter jets. While the fighter jets make the big noise, it is the infantry that can really win the war.

Tuesday, August 05, 2008

Encouraging Young Innovators

Today I read a news item on Google News that a group of engineers at RV College of Engineering in Bangalore have developed a car with ultra high fuel efficiency of 180 Km/liter of petrol or ~410 Miles/Gallon!

I guess that this would be some sort of a record. I congratulate this team of young innovators.

See: RVCE launches Garuda supermileage car

Wait! Don’t get all too excited to buy this car. This is just a prototype – technically it’s a car, but it is not really a people transport worthy yet. But that issue is not what I am concerned about. Instead I am very happy to see how many local companies jumped in to help these engineering students develop such a prototype: Tantra Infosolutions, CA Adapco, Chameleon Motors, Innoversant Solutions and Bimal Auto Agency.

What amazed me is that all these companies are local to Bangalore & have nothing to gain from the success of the project (except for PR & brief publicity).

The raise of Indian engineering and Innovation can be seen with this small success. For a long time, Indian educational institutes and industry complained about lack of Industry-education cooperation. But this is now changing – albeit slowly but surely changing for good.

Indian industries & business should join hands with colleges and universities to build innovation in India that meets the needs of its people. Garuda experiment shows how one can succeed with cooperation. Most importantly, Garuda project shows how one can encourage young innovators who are studying in universities.

Innovation Management - Taking Ideas to Concept

Recently a leading software company conducted a series of idea generation exercise involving all employees. The campaign was titled “India Innovation Network” and all employees were encouraged to generate & submit ideas. The campaign was very successful as employees submitted hundreds of ideas.

These ideas were meticulously documented and captured in their intranet portal. Company now faces a daunting task of how to select these ideas and how to converts the selected ideas into products.

Today, the biggest challenge for companies is to convert these ideas into product or product concepts. Unfortunately there is no easy way of doing this. As a innovation consultant, I have developed standardized processes to filter ideas and develop product concepts. The process vary from one company to another, however what I will be describing here is a general framework. You can adapt parts of this framework to fit the needs of your organization.

Generate & Capture Ideas systematically

In many of the creative workshops or brainstorming sessions, participants are encouraged to come up with ideas. Most participants come up with lots of brilliant ideas – but are too lazy to document them properly. As a result the ideas are often written down in a single line – in a way that only the person who came up with that idea can understand it and no one else. If these ideas are submitted as innovation ideas then it is almost impossible for others to understand it and take it forward.

At this point, I must emphasize that for any ideas to become reality will need efforts from other people: peers, superiors and stake holders. So if other people cannot understand your idea, then that idea has already lost its value.

To overcome this, make it a practice to capture the ideas in a systematic way. I recommend a standardized form in which ideas must be documented and entered into the system. Download a sample form.

Ideas that are filled in this form must then be archived in knowledge management system for further analysis.

Idea Assessment techniques

Idea assessment starts is needed when there are several ideas to be scrutinized. It is best to use a combination of internal and external experts for idea assessment – mainly to get a neutral opinion. Internal experts have a deeper subject mater expertise and can judge the ideas accordingly, while external experts have a wider expertise. Also the presence of external experts will remove the possibility of favoritism or faulty judgment of ideas.

Idea assessment team should first establish criteria for selecting ideas. Typically, ideas should be classified into low hanging fruits, medium, and challenging ones.

Company Strategy

Ideas must also be classified into categories based on the company’s strategy:

  • Ideas inline with the current strategy.
    This would typically be product extensions or modifications that will overcome the current shortcomings and result in wider usage. A good example will be iPod Nano as an extension of iPod. Similarly, Blackberry Connect on Nokia phones is an example of product extension.

  • Ideas inline with the long term business strategy.
    This would typically be new product introductions. Products that are similar to existing products – but are addressing. For example Nokia 3100 & Nokia 3110 – both low cost phones developed specially for the needs of India, and Dell’s introduction of printers.

  • Ideas which need drastic change in strategy.
    Some ideas are so dramatic that it requires companies have to change their strategy – or introduce a new service lines and build a whole new business infrastructure. Such ideas require major diversification of business. Apple’s introduction of iPhone is one such example. Getting into cell phone handset business marked a huge change in strategy for Apple. This required setting up a different line of business, a separate distribution system and a completely new support system. Similarly, EMC2 acquisition of Iomega. With this acquisition, EMC2 is entering into consumer products.

Once the ideas are classified, it becomes easier to decide on which ideas must be taken ahead. It is not a good idea to discard any ideas, instead, rank the ideas by a priority number in each of the category based on Market Opportunity Analysis.

Market Opportunity Analysis

All innovation ideas must be scrutinized for the possible market opportunity with that innovation i.e. what is the market demand for this idea. Since a detailed market opportunity analysis is unviable at this point of time, only a basic or a high level analysis must be done. Ideas must then be prioritized or ranked based on this market opportunity analysis.

Product Concept

All Ideas can be also be classified into Product Ideas or Service Ideas. Most ideas will either be a:

  • Product extension idea

  • Service extension idea.

  • A service extension for an existing product.

  • Productization of a service.

  • Manufacturing improvement.

  • Cost reduction ideas.

  • New product ideas.

  • New service ideas.

Classifying ideas into these categories will help making decisions on which ideas to fund for further development.

Feasibility Study

Ideas submitted will often fall into three categories:

  1. Feasible to implement it today.
    Eg: Develop a hybrid car or develop an electric car

  2. Ideas that will require technology enhancements to make it feasible.
    Eg: Develop Electric cars with a range of 300Miles per charge.

  3. Ideas are so futuristic that with current (or near future) technology the idea is not feasible. Eg: Develop a Nuclear powered car.

It is always best to implement ideas that can be implemented immediately – as such ideas have lower risk & higher returns on investments. However, companies that work on cutting edge technology products can also consider ideas in the second category (i.e., ideas will need technology enhancements)Futuristic ideas with high market opportunity must be presented to board or top leadership of the company. Futuristic ideas will need huge investments and a big appetite for risk – this means that only few companies can afford such projects, and its mostly the government labs that can undertake such projects. Motorola’s Iridium project was one such futurist idea, B2 bomber is also one such futuristic idea.

Market Requirement Specifications

Market savvy companies often keep themselves updated with the market demands. Such companies often conduct surveys to identify market requirements. If such market requirement study reports are available, then it must be used for idea screening. Ideas that match with market requirement specifications are the ones that should be taken up first.

GO AHEAD decision

Any idea generation sessions & submissions will have to be scrutinized and filtered before a GO AHEAD decision is made. The decision will have to be made by the BU heads and top leadership based on the budgets available and the potential gains. (Typically, larger the budget, higher the management level will be needed to make the decision. Ideas which are very futuristic or ideas that need change of business lines or business strategy will have to be approved by the shareholders or the board of directors or promoters. The professional management team should refrain from making such decisions.

Once a GO AHEAD decision is made, the next step is to develop a prototype or a simple “Proof-of-concept (POC)”. Prototyping or a POC will minimize the risks and increase the chances of success. People who submitted the idea must be involved in the prototype development, therefore allocation in terms of people, efforts & resources must be made along with the GO AHEAD decision.

Closing Thoughts

Idea screening is the first step in taking the raw ideas into a solid concept. Innovation is not easy – but getting ideas for innovation is. This results in people submitting LARGE number of ideas. But that poses the next challenge – how do I pick up the precious stones from the huge rubble of rocks?

In this article I have presented a basic framework for idea classification and filtering. This process though time consuming will result ideas becoming closer to reality. This exercise is the first necessary step in taking a raw idea into a concept.

The second step in the process of taking an idea to concept is called Prototype development and market analysis – which will soon follow this article.

Also See:

Ideas Classification Spreadsheet Template

Ideas Submission Template

Friday, August 01, 2008

Innovation by Imitation - Toyota Imitates Segway

Toyota today announced a series of products that resemble Segway – called Toyota Winglet. See the picture below:

Also see how it resembles Segway

With this release – Toyota seems to be making a bold statement – it is seeing a new need for personal transportation, which is pollution free and relatively faster than walking. At the same time, Toyota has improved upon the Segway. Segway was introduced with great fanfare in 2005, and since then the product had no updates & the sales was languishing – which is typical of any “alpha” release.

To succeed, Toyota winglet needs a significant improvement over Segway in terms of performance and battery life. Since we have not seen any real devices yet – it is best to wait and watch.

This form of innovation is common in Japan & Korea. Japanese & Korean companies thrive on imitation as form of innovation.

  1. Imitation as Innovation

  2. Imitation to Innovation: The Dynamics of Korea's Technological Learning

For more information see:

New Product Development & Project Management

A product manager is always eager to get a new product out into the market place. New product development will always need money for development & testing. As the product manager tries to work with other departments within the company, he is faced with one ominous question: When will the new product be released?

In most companies, new product development has not evolved into a perfect science – where there is perfect predictability with measured milestones. Ideally one would love to have such predictability – but when the development process involves charting into unknown territories: New technology; new materials; untested manufacturing process, there is only one certainty - “We do not have an exact answer.”

The product manager will have to deal with the uncertainty of the product release. The best way to deal with this uncertainty is to play a role of project manager.

A smart project manager will answer the question by showing a complex project plan, with clearly identified obstacles, milestones and resources needed for project completion. In short answer the question by saying if we get the following resources and if we overcome the following obstacles and if we achieve the following milestones, we can release the new product by this date.

This is almost akin to saying “you cannot schedule invention” – but in a nice way.

New Product Development & Projects

New product development requires a planned effort by employees dedicated for it. The scope and size of the efforts depends on the type of product being developed. Often times, product development will become a project. In case of complex products, this might involve multiple projects. For sake of simplicity & ease of understanding, I am considering a simplified case where the entire product development is represented by a single project.

Product Management & the Product Manager

In mature companies, there will be dedicated staff for project management. In addition, there will be a program management office. But in a vast majority of companies – there will not be any project manager assigned for new product development project.

In case there is no dedicated project manager, then it is imperative for the Product manager to don the role of a project manager. In such a case, the product manager also doubles as a project manager. Even in case of having a dedicated project management & program management office, the uncertainties in new product development will force the product manager play a role of project manager.

Establish a Project Office

The first step in developing a new product is to establish a Project Office. The project office is a dynamic team of stake holders who can help the project and can give constructive inputs to the project team. Note that the project office is different from the project team. The project team consists of members who work on the project – engineers, developers etc. The project office consists of various stake holders.

This should be a formalized team of several managers as needed by the product:

  • Project manager
  • Product manager
  • Engineering Manager
  • QA manager
  • Finance manager
  • Representatives from various stake holders
  • HR manager (if human resources is a critical issue for the project)
  • Vendor relationship manager
  • R&D manager
  • Production Manager
  • Sales Manager(s)

The project office meets once a week or once a fortnight based on the need. (The meeting can also be via conference calls or net meeting)

The purpose of this project office is to communicate the project’s progress, the current constrains faced and its impact on the project.

Project Manager and the product manager should drive the project office and educate all the stake holders about progress & constrains. It is the responsibility of the various stake holders to remove constrains for the project team and ensures that the project moves smoothly as per plan.
Points of Interest to the Project office

Various stake holders in the new product development have various interests. For example production manager needs to know when & how to schedule the production of the new product, Finance manager needs to know when he should release the budgets for procuring new tools, equipment, etc. To address these questions, the project office should publish:

  • Current Project schedule

    Project schedule & project status must be current at all times. Project should be broken down into various work-based-package elements and tasks within work packages. All these must be updated and kept current on weekly basis. The project details must be shared with all stake holders. There are times when the project schedule will change – i.e., slip. When a slip occurs, all stake holders should be made aware of it & the reason behind it.In complex projects – such as Tata Nano, it is best to have a project war room – where all the project details are available and often displayed.

  • Identified Project Risks.

    All projects have risks. Some are identified while some are not. Identifying the project risks is the first step towards mitigating those risks. Publishing all the project risks to stake holders is a sure way to seek help from stake holders to mitigate those risks.The entire project team – project manager, team members, engineering teams, product manager, manufacturing teams & and all associated members in the project team and the project office have the responsibility to identify project risks and inform it to the project office.

    Project manager along with Product manager have the responsibility to orchestrate the current risks to all stake holders.

  • Project constraints

    All projects will have constraints. The most prominent of them is the resources constrain: People, materials, tools, skills etc. These constrains are internal in nature, i.e., the company can solve it internally – by providing the required budget. In addition product development projects have external constrains when the project has dependency on external third party resources or information.

    For example, in a new car development, the constraint will be supply of component & component related information (drawings, specs etc).

    External constrains can be inform of government regulations, non-standardized specifications, non-ratified industry specifications etc. External constraints are mostly informational in nature. For example, if the product requires FDA approval in case of automatic insulin injector.

    Lack of knowledge or skills within the project team is also a constraint. When developing a state-of-art product, the project team may not have all the skills or the knowledge needed. For example, several years ago, I was involved in developing a new generation of microprocessors which needed a new manufacturing process in nano technology. The manufacturing process was so new, that none of the project team members had any knowledge of the electrical circuit behavior in the new manufacturing process. In another example, the project team had no knowledge about thermal characteristics for packaging.

    Product manager along with other stake holders must deal with these external constrains and provide guidance to the project team. While the Project manager must deal with the internal constrains.

  • Project (product) acceptance criteria.

    Every product development effort must start with the end product in mind. The end product must have certain features, functionalities, performance metrics, packaging needs, market release date, a selling price, cost to manufacture etc. All this together form the product requirements criteria. If there are “N” product requirements, not all the requirements can be met – mainly due to opposing factors, project constrains etc. It is therefore important to identify the basic minimum set of product requirements that must be met – in order to declare the project successful – and this is called as project acceptance criteria.

    Product Manager must publish a “Product Requirement Document” also called as “Product specification Document”. This document will list all the requirements on the product. In today’s dynamic world, the competitive pressures may force changes on the product requirement as the project progresses. This results in scope creep and may result on wasted efforts.

    The best practice to manage this will be to develop a market requirement document. This is a live document which captures all the market requirements, and this document can be updated or changed at any time as the market needs changes. The market requirements can be served either with a single product (aka “One size fits all” approach) or with multiple products. (Address the market needs in form if different segments). It is the responsibility of product management to figure out how best they can serve the market requirements – either with a single product or with a suite of products. For example, Microsoft used to have a single version of the Operating System (product) to meet all the market requirements – DOS, Windows 3.0, Windows 95, Windows NT, Windows 3.1, Windows 98, etc. But as the market demands increased, it found a need to have multiple products: Windows XP Home edition, Windows XP enterprise edition, Windows Vista Basic, Windows Vista Home edition, Windows Vista premium etc.Similarly, Auto manufactures have several versions or products to meet the needs of customers. Toyota has several brands and in each brand has several variants to meet different needs of its customers: Camry LE, SE, XLE, Hybrid, Corolla LE, XLE, S, &XRS models

  • Project status Tracking

    Project tracking is often viewed as a function of project management. It is role of the project manager to collect various project metrics and publish them regularly. However, it is the responsibility of all the stake holders – i.e., members of project office to provide those metrics and timely updates.

    For example, one of the metrics that should be provided by production manager is: predicted cost of manufacturing the new product. As the cost of raw materials or machinery or labor changes, the cost of manufacturing should be updated as well. This increase/decrease in costs must be tracked as part of the product development project.

    Similarly, Finance manager must update the “hurdle rate” and the expected margins – based on the market changes to interest rates. Sales manager should provide the changes to expected market demand or the demand forecast etc.

    These inputs must the provided at regular basis and the data is made available to all members of the project office, so that one can take meaningful decisions in benefit of the entire project.

    In addition to inputs from stake holders, the project manager must publish the project status & progress with respect to the original plan and the actual.

    The project metrics should be simple and easily understandable by all members in the project office. It is essential that they personally feel comfortable with the data and the parameters must truly reflect the state of the program’s progress. Simply tracking statistics such as the number of people on the job or the number of hours logged, the number of prototypes built tells the company very little.

  • Current Action Items & their owners.

    An ongoing project will have action items, their owners and the deadlines by which those action items be completed. Members of the project office should know what these action items and also know the impact of these action items on the project.

Project Results

When new products are introduced, the outside world (every one who was not involved in the project) will view it as a single breakthrough – more like a flash in a pan. But for project members, the new product was a result of long arduous journey – with several milestones that marked a systematic progress towards the final goal. In many cases, the successful project will have random changes which nearly destroyed the project.

If the project has a long development schedule stretched over several months or years, then the project teams should celebrate successful accomplishment of major milestones. Keeping track of all milestones and achieving them in a systematic way is the only way to achieve the project goal.

Project Exit Criteria

New product development projects will have several challenges – both internal & external to the organization. Internal challenges may be:

  • The development budget was slashed.
  • Critical people left the project.
  • Critical resources needed for the project was not available at the right times.
  • The project missed critical milestones.
  • Other internal challenges.
  • Cost of the product exceeded the market expectations

External challenges include:

  • Market requirements changed.
  • Business environment changed significantly.
  • Cost of the raw materials increased beyond the projected levels
  • The product development needed things that were beyond the present limits of technology.
  • Government regulations changed or industry standards were revised.
  • Etc

These challenges are asynchronous in nature. It is the responsibility of the project office to continuously monitor such challenges and mitigate the risks. However there will be times when such challenges will overwhelm the project team – then it is best to terminate the project.

To facilitate fast decision making, product manager & the project office must publish the project exit criteria at the start of the project, and this should be a living document that gets updated periodically.

People involved in the project become so attached to it, that they tend to think that killing a project signifies a personal failure. Such emotional connections will hamper rational thinking and decision making. But continuing on a bad project is like throwing good money after bad. History has shown that bad projects are often tough to kill. So it is the responsibility of the product office to closely monitor the product development project and take timely decisions.

Also see: Why Bad Projects Are So Hard to Kill

Closing Thoughts

New product development will usually consist of multiple projects or it may be one project with several sub-projects. Successful product development projects will need involvement from all stake holders. It is therefore essential to create a project office – where all the stake holders are involved and are engaged in new product development. Ideally it is good to have a dedicated project manager – but in case of small/medium sized firms which may not have dedicated project managers, then the product manager will have to play a dual role.

Successful new product development will also need a well defined product acceptance criteria or product requirements document. A prudent product manager should also know when to kill the project and should have a well established project exit criteria & the project office must play its role in determining the continuation of the project or to terminate the project.

Tuesday, July 29, 2008

Another Mega Merger Fails

Today’s business headlines screams: Alcatel-Lucent chairman, CEO to resign

And I say – “Another one bites the dust”

Mega mergers often fail to deliver value. Ever since I started watching the M&A activity, Almost all the mega mergers have failed to deliver value for the shareholders and the deal makers – the CEO of the acquiring firm is always forced to resign when the merger fails to improve share holder value.

To understand this better, just look at the history of recent mega mergers:

Also see:

Monday, July 28, 2008

Product Management - Developing breakthrough products

How does companies such as Apple, P&G, Nokia, Ikea, Google, Tata Motors, Toyota etc., comeup with so many successful products? How do successful companies - GE, IBM, Microsoft, Cisco, Unilever, Intel, HP, etc., maintain their market supremacy?

The secret to success lies in their ability to spot market winners ahead of the competition. Spotting a market winner is not an art - but it is no science either.

In political leadership circles, there is a saying - "The best way for one to become a leader is to identify a bunch of people walking in a particular direction and then walk in front of them"

The same logic can be applied in the marketplace: Identify the market needs and provide them with a product that meets the need.

This idea sounds so simple, yet for most companies - it is very difficult to implement. It doesn't mean that the company leaders cannot identify the market needs. They surely can. But they cannot quantify the market opportunities - and thus spend endless cycles waiting, watching and trying to quantify the opportunity - even when the competition runs ahead.

For example, given the current high oil prices - customers are demanding lower cost transport options, yet leading car manufacturers: GM, Ford, Toyota, Volkswagen, Nissan-Renant are still pondering over electric cars. On the other hand, Tata Motors is working its way on two alternative cars: An electric car & an Air car.

In software arena too there are plenty of examples. IBM completely missed the ERP market opportunity to SAP; DEC lost the PC opportunity to IBM; SAP lost the CRM market opportunity to Siebel; Microsoft lost the Internet search engine business to Google.
Similarly, a decade ago, Toyota was able to speed past Chrysler, Ford & GM with its hybrid car technology. While the Big three decided to wait & watch. Now GM & Ford are desperately trying to play catch-up in the hybrid car market.

Also see: Toyota will beat GM to the plugin electric hybrid

Why do incumbents stumble so badly?
Managers at incumbent companies see the emerging opportunity - but are almost always constrained by the existing management policies, current product lines, current product priorities and above all, constrained by lack of verifiable data - to make the correct decisions on emerging technologies.

It is not that managers do not see the market trends - they do. But in large companies, all decisions are based on numerical data. In case of demands for new products, such data is hard to come by and in absence of such researched data, managers are forced not to make any decision - and instead they opt to wait and watch.

In addition to lack of market data, managers will have to justify their investment decision on new products based on the existing "hurdle" rate. The current hurdle rate used for investment decisions are based on the current business and current products, and it has no relevance for new business lines, yet company managers (& investors) insist on using the current hurdle rates. This prevents companies from investing in new product opportunities. For example, Digital Corp - which was the market leader in Mini computers had all the right components to succeed in the PC market: it had the technology; engineering expertise; and market knowledge, yet in the end the company made a decision not to enter the PC business - because any business which has less than 40% margins is not a business to be in.

How Can Product Managers Overcome this?

When it comes to new product introductions - Product managers should be the ones taking the lead and evangelizing the entire organization. That also puts the onus to prove that the new products are commercially viable - i.e., the new product meets or beats the current hurdle rate.

Not surprisingly, product managers often stumble at this challenge.

Since there are no solid numbers one can rely on, Product managers will have to be creative and have to come up with other means to promote & propagate the need for this new product. In my experience, I have used product Opportunity Gap model to evangelize new product introductions.

Product Opportunity Gap Model (POG)

Identification of the market opportunities is at the core of this model.

A market opportunity exists when there is a gap between what is currently available on the market and the possibility for new or significantly improved products. A product successfully fills a product opportunity gap only when it meets the conscious and unconscious expectations of consumer and is perceived as useful, usable and desirable. Successful identification of a market opportunity is a combination of art & science. It requires a constant monitoring of factors in three major areas:

1. Business
2. Economic
3. Technology

Changes in the "BET" factors create a need for new products.

Product Opportunity Gap model puts the facts infront all stake holders and make them think how to fill the gaps in the existing products. Identifying product gaps will lead to product extensions and new product introductions.

As you can see Product opportunity gap varies from organization to organization. Identifying the product opportunity gap and positioning your product as the one which fills the gap.

POG Business Case for TATA electric cars:
Always start with listing the business factors affecting the existing product lines.
Business Factors:

  • Sustained High Oil prices
  • Global warming & pollution concerns
  • Lack of competition in this market
  • Inter city commute uses
  • Similar products currently in the market

Economic Factors:

  • High Inflation
  • Relative Cost Advantage of electricity Vs Petrol/Gasoline
  • Existing Electric Infrastructure

Technology Factors:

  • High charge capacity batteries (Lithium Ion Batteries are now available)
  • Efficient motors & Generators (dynamic breaks)
  • Light weight technologies (leverage learning's from Nano project)
  • Low maintenance ( Car maintenance is much lower in an electric car)

BET factors show that there is a need for electric cars in Indian markets. All the long term trend lines points to the market need, so at this point the audience would be convinced about the need for electric cars.

At this point, product manager should ask a budget for prototype development and market study. Developing a prototype will help in identifying the real costs, benefits and thus build a first cut financial model for the new range of electric cars.

A good advantage of "BET" model is that it makes people think about all factors that are driving the need for a new product. Stakeholders can be made aware of the existing trends in the business environment - and let them make a decision.

Closing Thoughts

Developing breakthrough products is a tough. The traditional rules of building financial models and projections do not work when it comes to developing new products. Therefore one should concentrate on evangelism within the company to build a need for new products. Product Opportunity Gap model is a tool for evangelism - and it brings all the points on to the table. At this point, the product manager’s job faces the moment of truth. If the stake holders agree to pursue the product opportunity internally, then product manager must then take charge and drive the project. Alternatively, stakeholders may prefer to launch a special purpose vechile (SPV) or a separate company to pursue this new opportunity. If that’s the case, product manager has done his job successfully and it is time to hand over the reigns to someone else. If the stakeholders shoot down the idea, then product manager still has opportunity to continue evangelize within the company and influence the stakeholders.